Fashion Manufacturing Simplified: Business, Sourcing and Global Industry Education and Information

How to Make the Best of Minimum Order Quantity (MOQ)?

The MOQ (Minimum Order Quantity) is the lowest requirement for factories to produce a certain product. As a new designer just getting to grips with the manufacturing process, these limitations can upset the apple cart. Understanding why these restrictions are in place can help you to navigate your way around MOQ’s and negotiate different terms with the factory.

 

Countries that produce Fully Factored fast fashion, such as China, Bangladesh, Cambodia and Turkey, tend to have very high quantity requirements. And these are based on a number of factors. The majority of overseas manufacturers operate on incredibly tight profit margins, sometimes as low as 3%-5%. Therefore, large quantities of products must be produced in order to break even.

How is MOQ determined?

The manufacturer’s Minimum Order Quantity requirement is a reflection of the MOQ set by their materials and components subcontractors as well as for efficiency and operations cost purposes. For example, Fabric suppliers may require a minimum order of 1,000 yards, or a cut and sew supplier might have a minimum order quantity requirement of £1,000 for just one order.

Find out if these factories can produce your order at your desired quantity

To keep cash flowing, a minimum amount of stock materials and components are held by the manufacturer. When they receive an order they will have to purchase these items on an order-to-order basis. The factory is therefore required to satisfy the MOQ of the subcontractor.

Minimum Order Quantity – The Math

This explains why different items and different materials including colours, have different MOQ’s.

In some instances, the designer could reduce the limitations of MOQ’s by identifying which materials are stock items and use them to produce their goods.

Many factories in Italy, specifically those producing accessories, offer a customizable service. The more you customize a product, the higher the MOQ requirement rises.

Lowering the MOQ’s in high yield overseas manufacturing units is difficult as the supplier has very limited room for reduction. They may not be able to offer you a lower Minimum Order Quantity without taking a loss or being forced to take a bigger risk by buying more materials and components that are actually used for your order.

Some suppliers may consider offering buyers a lower MOQ, in return for a higher price. Working out the supplier’s quantity requirement structure is often far more efficient. By doing so, you can design your product, and use materials and components that the supplier is able to procure in lower volumes.

If you’re unable to convince a supplier to lower their Minimum Order Quantity, your next option is to seek out an alternative product or material that will not differ too much from your original design.

Top Tips

For early-career designers who are looking to do a smaller test run before making a larger order, or who simply might not have the capital to reach the Minimum Order Quantity requirement, these volume producing factories are unlikely to do business with you.

However, factories that have slightly lower MOQ’s, would probably consider reaching an agreement with you to produce smaller quantities. If the brand’s business model is to scale their production up the season by season then it’s worth negotiating with the factory. The best way to do this would be:

  • Ask for a reduced minimum order

Just ask, it’s as simple as that.

  • Low minimum at Higher Price

Usually driven by the factory but offer to increase the price. Let the factory get back to you with a figure as you may offer too much.

  • Gradual Production Run

It’s worth negotiating with the factory if it’s your intention to scale your production up on a monthly basis over a season. This only works once you start to grow and increase your production. Committing to a “Programme” allows the factory to better manage their staff and production schedule and therefore can yield small discounts.

  • Find an Alternative

If you’re unable to convince a supplier to lower their Minimum Order Quantity, your next option is to seek out an alternative product or material that will not differ too much from your original design.

If for example, you need customized buttons but can’t meet the 2,000 piece minimum, the supplier may be more accommodating if you ask for a smaller order of buttons that are already in stock.

Similarly, you may find that another of their customers has ordered a comparable custom button, and you can take some of the blanks from that order. While this may mean that you don’t get a product to your exact specifications on the first order, you’ll be able to build a rapport with the supplier. Therefore you will grow your own business to eventually meet the Minimum Order Quantity.

Why are MOQ’s in place?

It’s worth remembering that MOQ’s are also in place to ensure that the factory is covered for all of the developmental costs.

Prior to the last recession in 2008/9, factories used to charge a production cost + 50% or + 100% per sample. In the initial days of the recession, many brands cut out new product development and left the factories dry. When they returned, they ordered large amounts of sampling in order to bypass the mandatory sampling costs but cheated the factories by subsequently only placing small orders. They were using the samples to show newness but not following up with production. Some factories retaliated by charging a one-off fee, on top of the charges mentioned above. This covered some of the time spent on working out new designs and pattern development.

While it’s true that MOQ’s are in place to protect the factory, if you build up a good relationship with them, it may be possible to negotiate a refund on some of the sampling charges once the MOQ’s have been met.

The production prep takes basically the same amount of time for ten pieces that it does for one hundred.

Jan Slup of Art Dress had this to say about MOQ’s:

“As a factory owner I can say that I understand that some clients see MOQ’s as an annoying practice, but it’s a break-even thing. What you need to understand is that there is a lot more than just sewing when you order a garment. The production prep takes basically the same amount of time for ten pieces that it does for one hundred. What’s more, each subsequent piece takes less time for a seamstress to make. This because the production of the first pieces is a ‘figuring it out’ exercise, which is much slower and more labour intensive. I understand that designers would want their garments cheap, produced in smaller minimums and great quality but so far you can only have two of the three”.

Make the Best out of Minimum Order Quantity

Minimum Order Quantities don’t have to be intimidating to designers. By entering a dialogue with your chosen factory and negotiating terms before you even start sampling, it’s possible to keep them happy while you get what you want.

If you’re unable to reach the minimums, think of an alternative. Become more fluid and open to small changes in regards to fabric or trimmings choices, for as you know these also incur MOQ’s that affect the factories minimum order quantities. It’s so important to get to know the manufacturing processes your factory of choice uses. Through understanding this you can see what the possibilities, for your production, are.

If you have any questions about this article or general feedback then please do not hesitate to let us know in the comments below.

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